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Throughout the 1950s and 609, Mr. T. Ohno of the Toyota developed the k a n Production System. Consequently many other Japanese automobile companies adopted it. The net result waa the Japan’s automobile industry enhanced its productivity during this period relative to the US, which generally just kept up with inflation because of its already high rate of accumulated experience and relatively deliberate growth. Suppose the Japanese industry started in 1955 with production of 100,000 cars per year and the initial cost of $2,000 per car and that production (demand) increased 50% per year for the upcoming five years and then 25% per year for the upcoming 10 years. If Japanese relative costs compared to US dropped 20% for each doubling of accumulated experience (the total amount ever produced), in which year would Japanese costs equivalent US costs if the US cost per car in 1955 was %1W? (In your computation, you can suppose that for comparative purposes the US industry’s cost remained stable and would have remained stable even if they had supplied the Japanese market,) Given the real discount rate on Japanese government bonds of 6% throughout this period, by 1970 was the cost to Japan of protecting this industry recovered because of its enhanced long run productivity compared to having imported cars from US?

Operation Management, Management Studies

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